'CBS MarketWatch Weekend': Complete transcript of show

CBS.MarketWatch.com

Following is a complete transcript of last weekend's installment of "CBS MarketWatch Weekend," as recorded by Federal News Service.

SATURDAY/SUNDAY, MAY 20/21, 2000

HOST: SUSAN MCGINNIS

------------------------------------------

MS. MCGINNIS: Coming up on "CBS MarketWatch Weekend," if you're down on rising interest rates, Marshall Loeb explains how you could make money on those Fed hikes. And is your pin number or password secure? Well, how about using your body parts to log on? We'll tell you about a new technology that's about to explode. It's called "biometrics." Plus, Playboy.com bares it all for Wall Street, but will investors be attracted? We talk to chairman and CEO Christie Hefner. It's all straight ahead on "CBS MarketWatch Weekend."

(Music.)

Hello and welcome to "CBS MarketWatch Weekend." I'm Susan McGinnis. Wall Street and the business world will be closely watching several funds this coming week. Sprint
FON, +0.00%
and Worldcom
wcom
will continue to stress their conviction that their proposed merger will be approved after a big blow to the deal last week when Justice Department officials revealed their intent to block the $115 billion deal because it would hurt long distance competition.

Also, watch Congress this coming week now that China and the European Union have reached a deal for Beijing to join the World Trade Organization. The market opening deal could impact companies and markets worldwide and it could spark a debate in Congress this week on granting China permanent low-tariff access to the American market.

And how will the markets behave this week in an environment of rising interest rates? Well, last week's half-point hike in rates by the Fed was met only by markets trading in a narrow range most of the week. Let's see what's in store, with Alexis Christoforous.

Alexis?

ALEXIS CHRISTOFOROUS: Well, Susan, with little in the way of market-moving news in the coming weeks, investors are expected to focus on how much higher interest rates can go and what that will mean to corporate profits. Analysts also tell me you can expect stocks to continue in this tight trading range as investors search for direction.

Trading volume has been anemic for the past two weeks now, more proof that investors just don't know which way to go. On Friday, we saw lots of red ink. The Dow Industrials
DJIA, -1.35%
sank 150 points to 10,626 for the week. The Dow
DJIA, -1.35%
was little changed. The S&P 500
SPX, -1.42%
slipped 30 points, down 1 percent on the week and the Nasdaq
$compq
tumbled 148 points, down nearly 4 percent for the week, its third straight weekly decline.

Not even strong profits were enough to boost this market. Just take a look at Ciena
CIEN, -1.87%
Even though earnings beat the street and it had an optimistic outlook, the stock got hit, down more than $20. Intel rallied early in the week on word of a two-for-one stock split, but was hammered Friday, down more than $6. The company said first quarter earnings will be cut by a penny a share because it has to pay for a faulty chip set. But Drkoop.com
koop
up nearly 7 percent. Analysts say the ailing Internet health company is a takeover target.

That's all from the Nasdaq. Susan, back to you.

MS. MCGINNIS: Thanks, Alexis. Well, the world is going wireless and that's presenting opportunities for high-tech companies and investors across the globe. As the world of telecommunications grows, Thom Calandra takes a look at the small-tech firms that could be big winners.

ANNOUNCER: Thom Calandra's "StockWatch" is presented by Datek Online. The rules of online trading are changing.

THOM CALANDRA: Lots of worried investors are praying this Spring's tech tumble becomes this summer's tech rumble. If it does, investors will be looking for the small technology companies that service the big-tel communication equipment suppliers in the United States and across Europe.

In the United Kingdom alone, companies will spend $35 billion to acquire new wireless licenses. That could create $200 billion of business for British mobile service providers, Internet broadband developers, and other telecom equipment makers.

The United States will generate its fair share of telecom equipment business, too. Just take a look at those workers tearing up your street down the block.

The biggest beneficiaries will be the biggest companies, Nortel Networks
nt
of Canada, and Ericsson
"
of Sweden. One analyst at Leaming Brothers in London says Nortel is aggressively pursuing British Telecom
BT, -0.44%
for contracts to supply data networking equipment. Ericsson probably will score big with global wireless giant U.K. Vodafone
VOD, -0.77%

The question for investors is, how do you take the back road to seize these telecom opportunities? Well, one small Georgia company, Antec
antc
has a joint venture with Nortel. Antec's technology lets cable modem users browse the Web, play electronic games, watch interactive TV across Europe. That company's shares trade on Nasdaq.

Another Nasdaq stock, a British company, Bookham Technology
bkhm
makes electronic circuits that direct light signals in the next generation of optical communication networks. Those fiber optic networks are what telecom companies are so excited about these days.

MICHAEL THIEME (senior consultant, Biometrix Group): Iris technology isn't used quite as much, but it's a very accurate technology. It's one that people think is going to be used a lot in the next few years.

(Announcements.)

MS. MCGINNIS: The next time you use your ATM, it may ask you for your fingerprint instead of your PIN number -- maybe not the next time. But the latest technology is allowing newer and more secure ways to verify a person's identity. Correspondent Stacey Tisdale takes us into the world of biometrics.

STACEY TISDALE: Government and security organizations have been using biometrics for years, and analysts say soon fingerprints and eye scans will replace passwords in technical devices ranging from personal computers to ATMs.

Biometrics is the science of verifying a person's identity by comparing unique body characteristics, like a fingerprint, with an image that's stored in a database.

Joseph Atick is the CEO of Visionics, a company that specializes in face recognition technology.

JOSEPH ATICK (CEO, Visionics): And it takes an image through that video camera, and it analyzes the landmarks of your face. Landmarks of the face include the protrusions on your skull, such as the cheekbones here, sockets of the eye, the bridge of the nose, the tip of the nose, et cetera.

MS. TISDALE: Face recognition is only the beginning.

MICHAEL THIEME (senior consultant, Biometrix Group): Other popular ones include, as mentioned before, hand geometry, more for just basic getting into buildings and going to work. Face recognition is a popular technology used at ATMs. Iris technology isn't used quite as much, but it's a very accurate technology. It's one that people think is going to be used a lot in the next few years.

MS. TISDALE: The biometrics industry is expected to explode over the next few years, primarily because of the love-hate relationship consumers have with the Internet. People love the convenience of having almost any product or service at their fingertips, but hate the fact that passwords and credit card numbers are floating around in cyberspace.

MR. ATICK: Think about some parent at home working on sensitive files that they may not want Junior to have access to.

MS. TISDALE: Falling prices for biometric devices are also expected to boost the industry. Technological advances have dramatically reduced production costs.

MR. THIEME: We're now talking about readers that are out there in the marketplace for less than $50 and probably will be less than $20 in a year.

MS. TISDALE: Microsoft recognizes the growth potential of Biometrics
dbii
It will be integrated into future versions of its Windows operating system. And the software giant is not alone.

MR. THIEME: I think Identix at the moment is the leader among the independent companies because they have a unique combination of application suites of software in addition to the fingerprint readers that they have. There are a lot of companies out there -- Sony
SNE, -4.54%
Veridicom, an old division of Lucent
lu
an old division of Siemens
smawy
and, for that matter, most recently Polaroid
PRD, -1.86%
-- have all come out with fingerprint readers.

MS. TISDALE: Some fear the industry will be faced with the big privacy issue the Internet is now battling. Once your information is stored in a database, can it be sold to other businesses for tracking and marketing purposes? In fact, the American Civil Liberties Union says the major problem with biometrics is, quote, "the technology has been developing at lightning speed, while the law has not developed at all."

But analysts don't think these concerns will stifle growth. Many estimate the industry will be generating about half a billion dollars annually within three years. That's 10 times the current rate. And these prospects have not gone unnoticed by Wall Street. Some analysts think biometrics companies like Identix
IDX, -0.83%
PrinTrak
afis
and Digital Biometrics could add some security to your portfolio.

Susan.

MS. MCGINNIS: All right. Stacey Tisdale, thank you for that report.

And still to come on "CBS MarketWatch Weekend": Rising interest rates, volatile markets; where should you park your dollars when the going gets tough? Marshall Loeb has an investment idea you won't want to miss. And will Wall Street be turned on by Playboy.com? We talk with the company's chairman and CEO, Christie Hefner, about her plans.

(Announcements.)

MS. MCGINNIS: Welcome back to "CBS MarketWatch Weekend."

A rising interest rate environment doesn't worry everyone. In fact, people who live on fixed income are realizing they stand to benefit from rising rates. And now some analysts think municipal bonds are a good place to park your money, with a potential return of more than 6 percent a year, and all of it tax free.

Marshall Loeb is here now and explains why you may want to consider this investment.

Marshall?

MARSHALL LOEB: (Columnist, personal finance): We're talking about good old insured municipal bonds. Lately, high-rated "munies" have been yielding just over 6 percent. For example, this past week you could buy a 25-year New York City general obligation bond paying 6.20 percent. That's a bit more than the 6.18 percent that a 30-year U.S. Treasury bond
TYX, -0.03%
was paying. The big difference is that with muni bonds, you pay no federal income tax on the interest you collect semi-annually. And if the bond was issued by an agency in the state where you live, no state or local taxes, either. However, with Treasuries, your interest is exempt from state and local taxes, but not federal income tax.

Let's say you bought a muni bond yielding 6.20 percent. After all taxes, that's equivalent to 8.61 percent if you're in the 28 percent bracket, 9.39 percent if you're in the 33 percent bracket, and 10.16 percent if you're in the top 39.6 percent bracket. Half of the muni bonds that come to market are insured by the issuer. If yours is not, you can buy insurance through your broker from one of four bond insurers. It costs only one-tenth to one-fifth of a point. Still you do run some risk that bond interest may scoot up a lot more and bond prices would then come tumbling down. That's what happened in 1999, a terrible year for bonds. But since January 1st this year, muni-bond prices have gone up a bit. So if you are considering some money out of volatile stocks and into another investment, muni bonds may be worth a look.

Susan?

MS. MCGINNIS: Marshall, how and where can you buy muni bonds?

MR. LOEB: Buy them through your stockbroker or one of the regional bond brokerage houses that specializes in municipal bonds. The minimum purchase is usually $5,000 or so for one bond.

MS. MCGINNIS: Okay. Thanks for that, Marshall Loeb. And remember, you can view all of Marshall's Personal Finance columns on our website, at CBS.MarketWatch.com or on AOL at keyword "MarketWatch."

Coming up next on "CBS MarketWatch Weekend," is it time to make Playboy.com the centerfold of your stock portfolio? Playboy Enterprises
PLA, -11.11%
is set to spin off its online division. We talk with chairman and CEO Christie Hefner when we come back.

(Announcements.)

MS. MCGINNIS: Sexy swinging Playboy Enterprises has beefed up its online division and is now poised to spin it off as a separate publicly traded company. Alexis Christoforous caught up with Playboy's Chairman and CEO Christie Hefner to find out how Playboy.com plans to wow Wall Street.

CHRISTIE HEFNER (chairman, chief executive officer, Playboy Enterprises): One of the big challenges a lot of the start-ups have is the massive amounts of spending that are needed to build brand awareness. And when you see a women's network like Oxygen buying time on the Super Bowl, not the most efficient way to reach women, you realize how hard it is to break through the clutter, a challenge the Playboy really doesn't have. I think people see that, for 45 years, the company has built a brand that stands for quality sexy entertainment for grownups and has moved it from a magazine focus to a multimedia focus on a global scale.

ALEXIS CHRISTOFOROUS (CBS MarketWatch correspondent): What is the timetable for Playboy.com to go public?

MS. HEFNER: Well, we are in SEC registration right now. We are waiting for comments, and we haven't gotten our final approval. And then we'll look at the market. And as soon as we think the market looks good, we will go forward with the IPO.

But our basic strategy has been to have the Playboy.com site, which is an entertainment/life-style site that is ad-supported, and then to take the sexy portions of Playboy, in terms of the pictorials and ultimately video streaming, and put that in the cyberclub and offer that on a pay-for-view or subscription basis. And having just broken through 50,000 paid subscribers, which is a $70 annual fee, we think that that's a very encouraging sign because not very many sites have been able to sell content.

So we have the advertising revenue stream, we have the content-sale revenue stream; and we sell our own proprietary products, which of course are a high-margin and unique product base for us.

MS. CHRISTOFOROUS: What do you say to the analyst who tells the investor, "If you want a piece of Playboy, go ahead and buy the Playboy parent company, which trades on the Big Board; don't buy a piece of the dot-com"?

MS. HEFNER: Well, I think it's an opportunity for people to play in either or both. And I think that that will be the result of the spin-off. I think, clearly, a lot of the present institutional investors in PEI are focused mostly on the television part of our business. They are excited about the growth of digital in the U.S. Entertainment is our most profitable business, but we are still only in 20 percent of the cable homes because of channel capacity. And as digital enhances the opportunity for launches, that's going to create a lot of growth for us. And we signed a big international venture last year to grow overseas.

So I don't think all of those investors will necessarily also want to play on the online side; and on the other hand, there are clearly investors who want purer Internet plays, and Playboy.com will represent that.

MS. CHRISTOFOROUS: Finally, what do you think are some of the biggest challenges going forward for Playboy.com?

MS. HEFNER: Well, one of the things that we're excited about is the globalization of the site. And so our challenge is to find the right partners in all the major territories of the world, just as we have for the magazine and now for television, so that we can create sites in Germany, in Latin America, in Japan and elsewhere that are built around local content and local celebrities and local lifestyle information. And the need to find the right partners and make those ventures work, I think, is going to be one of our important challenges. And then overall, like all online companies, it's attracting the right management team.

MS. CHRISTOFOROUS: Christie told me one of the most common misconceptions about Playboy Enterprises is their work ethic. When you walk through the doors of the Playboy offices, no one's running around popping champagne corks as scantily clad women dance down the halls. Playboy is serious business. And Christie Hefner seems committed to making Playboy.com a success.

Susan.

MS. MCGINNIS: All right. Thanks for that, Alexis.

And still to come on "CBS MarketWatch Weekend": The days of cutting deals in stuffy boardrooms could be over. We'll tell you about an unlikely setting where some high-tech heavies are cooking up big deals.

(Announcements.)

MS. MCGINNIS: When you think of the billions of dollars the high-tech industries generate, you might assume that the players involved get together at posh restaurants in Silicon Valley to do their deals; but you may be surprised to learn that one major meeting place where entrepreneurs dream up companies and seek out venture capital is a quaint little diner in Woodside, about 30 miles south of San Francisco. Victoria Fung takes us there.

VICTORIA FUNG: It's a typical morning at Buck's of Woodside. The dress: casual khakis and sport shirts. The mood: friendly and upbeat. The food: hearty breakfast fare. And the decor: stuffed to the gills with kitsch, from cowboy paraphernalia to a velvet Elvis to a boxing alligator. Owner Jamis MacNiven downplays it all.

JAMIS MACNIVEN (Owner, Buck's Restaurant): We're just a local joint. We're a pancake and burger place.

MS. FUNG: But the buzz here? The talk is high-powered in this rustic hamlet flush with entrepreneurs. Buck's is where Netscape
nscp
was partially funded and where HotMail was born. This is where venture capitalists shop for new companies, a place of established power brokers and eager newcomers.

REA CALLENER: Yeah, we actually founded the company here. We were sitting right here when we, you know, came up with -- well, I came up with the concept.

JIM MESSEMER (chief executive officer, Hopelink): The company was founded here at Buck's. Yeah. We had probably, literally, our first 25 or 30 meetings here.

MS. FUNG: This funky little eatery, where breakfast can be had for about $10, is where, on any given day, multimillion deals are made. We are told this is where hundreds of companies have been founded and countless IPOs have been launched.

Over the one corner, we find Jim Messemer, who launched Hopelink, an Internet information service for people seeking medical treatment options. It happened several months ago over coffee here at Buck's.

MR. MESSEMER: This is a great place to meet other executives, venture capitalists, angels, as well as investment bankers.

MS. FUNG: Messemer got financing with the help of Ram Shriram, a veteran of Netscape and Amazon.com
AMZN, -1.70%

RAM SHRIRAM (venture accelerator): It's sort of the power hangout, and I believe it's been instrumental in shaping the future of a lot of start-ups.

MR. MACNIVEN: Well, I think primarily people come for the fashion statement that I make with my clothing.

MR. MACNIVEN: It's sort of my canvas here. I get to design the food, design the atmosphere, and just everybody comes in.

MS. FUNG: The regulars agree.

MARK DICKEY (senior vice president, sales, Smartpipes): He has creative energy. He is a lot of fun. And, you know, I think -- I mean, clearly, it's a great place to come. Look around you. It reflects Jamis' personality. So I think it's the perfect kind of environment for this kind of activity.

CUSTOMER 1: You come here just for the good breakfast.

CUSTOMER 2: Uh-huh (in affirmation).

CUSTOMER 3: Just for coffee.

MS. FUNG: The locals, who have been coming to Buck's for a decade, say it may be harder to hitch their horses out front, but no one seems to mind.

CUSTOMER 4: Well, the biggest change I have noticed is when you are waiting for it to open, people are out there talking and visiting. Now, they're all out there on their cell phones.

CUSTOMER 5: But it used to be just pick-up trucks out there, and now there's Lexus and Mercedes and all the fancy cars.

MR. MACNIVEN: This fellow over here in the black sweater is the guy that put Schwab's website together.

MS. FUNG: It seems an unlikely ground zero for the movers and shakers of the Silicon Valley. But miss out on meetings at Buck's, and you just might miss out on the opportunity of a lifetime.

In Woodside, California, Victoria Fung, CBS MarketWatch.

MS. MCGINNIS: Buck's owner Jamis MacNiven says that some of the meetings have gone on so long, he has closed up the restaurant a few times and left the customers there to finish talking.

Well, that wraps up this edition of "CBS MarketWatch Weekend." I am Susan McGinnis. Thank you for joining us. Have a great week. And until next time, we'll see you on the World Wide Web.

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